A Widening For-Profit College Job Placement Scandal?

Can the job placement rates that for-profit college companies report to prospective students and regulators be trusted? While this question has long dogged the sector, it has taken on a special urgency recently as reports of abuses have mounted.

Late last week, the publicly-traded for-profit higher education company Career Education Corporation alerted investors and financial analysts that it has discovered “improper practices” at “certain” of its health professional schools related to how they determine their job placement rates. Company officials did not disclose the nature of the problems, which they said they found while preparing a response to a subpoena from the New York attorney general. But the violations were serious enough to prompt the company to hire an outside law firm “to review the determination of student placements” at its more than 80 U.S campuses.

“I can assure that the independent investigation will be thorough,” Gary McCullough, the company’s president and chief executive officer told the analysts during a conference call Thursday on the corporation’s latest quarterly earnings.

The news from Career Education Corp. came just days after the Texas Workforce Commission (TWC) announced its intention to revoke the license of another for-profit school chain, ATI Enterprises, to operate in the state because it found that the company has engaged in a systematic effort to mislead students and regulators about its record in placing graduates into jobs.  [Update: On Tuesday, ATI announced that it had reached an agreement with the commission that would allow its schools to continue operating in the state with “conditional approval,” while at the same time shutting down about two dozen programs they offer.]

As we reported last week, the commission took this action after an independent accounting firm that had been hired to verify ATI’s job placement rates found that 90 percent of the company’s programs in the state had “significantly overreported” their rates for the 2010 fiscal year, and that 63 percent had actual rates below the 60 percent threshold that TWC requires schools to meet. The firm also discovered that some of the schools’ programs had contacted fewer than 11 percent of their former students to confirm whether or not these individuals were working in a job related to their training.

Neither the commission nor the firm showed exactly how ATI schools had falsified their job placement rates. But during a year-long investigation of the company, the news team at WFAA-TV in Dallas interviewed former ATI employees who said that career service advisors at the schools often created fake employment records and forged former students’ signatures onto them. While ATI has acknowledged that some of its employees acted improperly, the company denies that there have been widespread abuses.

ATI and Career Education Corp. are hardly the only for-profit higher education companies that have been accused lately of cooking the books on their job placement rates. Others include:

• Education Management Corporation: Last September, a career service advisor at EDMC’s Art Institute of Pittsburgh testified at a U.S. Senate hearing about tricks she said the country’s second largest for-profit higher education company plays to inflate its job placement numbers. Kathleen Bittel, who has since left the company, revealed that graduates have to work for only one day to be considered successfully placed. She said that the company also puts tremendous pressure on employees to persuade students to verify that they are working in the fields in which they trained even when it’s abundantly clear that they aren’t.  “If one could convince [these graduates] that they were using these ‘skills’ at least 25% of the time in their current job, and to sign the employment form stating so, then their job could be counted as field related employment,” she stated. In addition, she said that it is not uncommon for career service advisors “to manipulate information received from a student, to ensure that the student could be listed as ‘gainfully employed’ for the purposes of the company’s statistics.” For example, when graduates report earnings that are too low to be included in the lists, advisors often delete the records, and create new ones using average salary data they obtain from the website Salary.com. EDMC has repeatedly denied these allegations.

• Corinthian Colleges: In October, WFAA-TV exposed an internal Corinthian Colleges investigation that found that administrators at one of its Everest College campuses in Texas had falsified the employment records of 288 graduates over four years. Of these former students, 176 purportedly worked for a sham company — created by a friend of the school’s career services director — that did not have any employees. The other 119 were listed as working for a company that only employed seven Everest College students. Corinthian Colleges voluntarily reported its findings to the Texas Workforce Commission and fired the “rogue” employees who had been involved with the falsifications. The job placement issue has been a sensitive one for Corinthian since 2007, when the California Attorney General filed a lawsuit accusing the company’s schools of deliberately and persistently misleading prospective students about their rates. The case was ultimately settled, and Corinthian did not admit to any wrongdoing.

At Higher Ed Watch, we believe that all of these allegations and findings of abuse around job placement rates should raise red flags for regulators. This is certainly an issue that is ripe for the attention of the 18 state attorney generals that are currently investigating the for-profit higher education industry. Meanwhile, the Department of Education needs to launch its own investigation to determine whether this type of misconduct is widespread throughout the industry and, if so, hold schools accountable for engaging in it. New regulations that went into effect last month give Education Department officials expanded authority to crack down on schools that mislead students into enrolling. They should not hesitate to use it.